Competing House and Senate FY 2014 Budget Plans Introduced

3/25/2013

Earlier this month, the House Budget Committee Chairman Paul Ryan (R-WI) unveiled his FY 2014 budget resolution and it has now been approved by the House. Meanwhile, Senate Budget Committee Chair Patty Murray (D-WA) introduced her FY 2014 budget resolution and it was approved by the Senate on March 23.

The budget resolution sets broad overall spending policy, based on a variety of assumptions and policies. These House and Senate budget plans are dramatically different, reflecting very different policies that set the stage for heated debate as well as a possible “grand bargain” later this year.

House FY 2014 Budget

The House FY 2014 budget resolution includes many of the same proposals contained in last year’s budget. However, this year’s budget aims to erase the federal deficit in 10 years rather than 25 years as in last year’s budget. The Ryan FY 2014 budget would cut nondefense discretionary (NDD) spending by nearly $1 trillion over 10 years below the Budget Control Act (BCA) spending caps agreed to in 2011, and by $554 billion below the post-sequester caps. This category of spending encompasses virtually all the programs of interest to community colleges and their students. In FY 2014 alone, the House budget would slash funding for NDD by $55 billion below the sequester level and by $92 billion compared to the BCA cap.

The House plan also would cancel the mandatory funding for the Pell Grant program and the Trade Adjustment Assistance Community College and Career Training (TAACCCT) grants, further squeezing the reduced NDD funds. This budget would deeply reduce funding for education and job training by more than doubling the level of cuts required by the recent sequester, freezing the maximum Pell Grant for 10 years, eliminating mandatory funding for Pell Grants, and doubling the student loan interest rate for subsidized student loans.

In addition to calling for a dramatic reduction in discretionary funding, the House FY 2014 budget resolution calls for reducing individual and corporate tax rates, and restructuring a number of the large entitlement programs, including Medicare and Medicaid.

Now that the House has approved its resolution, a number of disturbing details are emerging. According to the House budget (H.Con.Res. 25), funding for higher education programs would be reduced sharply. Key changes include:

Freezing the Pell Grant maximum at the FY 2013 level for the next 10 years

Eliminating more than $80 billion in mandatory funding for the Pell Grant program

Rolling back the student aid eligibility expansions made by the College Cost Reduction and Access Act of 2007

Eliminating the administrative fees for the Pell Grant and campus based aid programs

Eliminating the in-school interest subsidy for undergraduates (graduate students already lost this protection)

Mandatory funding for the College Access Challenge Grants ($150 million in FY 2013)

The House bill would also:

Allow the interest rate on subsidized Stafford loans to double on July 1, from the 3.4% to 6.8%

Repeal the expansion of the Income-Based Repayment program established by SAFRA

Eliminate funding for the TAACCCT grants ($500 million in 2014)

These cuts to education and job training programs would be in addition to the 5% cut mandated by the BCA for FY 2013.

The Senate FY 2014 Budget

The Senate FY 2014 plan would invest more robustly in education and job training than its House counterpart, while replacing the automatic sequester cuts with a “balanced mix of spending and revenue savings.” Both the House and Senate budgets call for deficit reduction, but the House plan projects $4.6 trillion in savings over a decade versus $1.85 trillion in the Senate budget plan.

The Senate budget resolution assumes funding for FY 2013 and 2014 at the statutory levels included in the American Taxpayer Relief Act (ATRA) enacted earlier this year. Then, beginning in FY 2015, the resolution assumes further reductions to the BCA security and non-security funding levels, although the reduction in funding would be significantly less than in the House budget.

The Senate budget calls for investments in education, federal student aid, research, and critical infrastructure. It would preserve mandatory funding for the Pell Grant program to enable future increases to the maximum award and it proposes making the American Opportunity Tax Credit permanent.

With passage of their respective budget plans, the House and Senate will now turn attention to other issues, including the FY 2014 appropriations.